Farm lending by banks in the three States — Madhya Pradesh, Chattisgarh, and Rajasthan — is likely to slow down. There is also fear that non performing assets (NPAs) related to the farm sector will go up not only during the present and subsequent quarters of the current fiscal, but also spill over to the coming years.

In the three States, the amount of crop loan outstanding as on March 31, 2018, stood at ₹1.47 lakh crore.

“If you don’t repay this year, then banks won’t give loan to farmers,” a highly placed source in the banking sector told BusinessLine .

The three States have announced farm loan waiver, but the terms and conditions are yet to be finalised. There is a possibility that total due amount will be staggered, which means the States will pay part of the money now and remaining payments will be spread over 3-5 years.

Madhya Pradesh announced waiver for loan up to ₹2 lakh which is likely to cover 40 lakh farmers. Similarly, the decision of the Congress government in Chhattisgarh on loan waiver would cost ₹6,100 crore to the State’s exchequer, but benefit 16 lakh farmers. Rajasthan also announced a waiver of short-term loans taken by farmers from cooperative banks and loans of upto ₹2 lakh from other banks. The waiver would cost ₹8,000 crore to the State government.

“Now, the problem is many of the farm loan borrowers have already stopped paying EMIs in the anticipation of loan waiver,” another banking source said.

Technically speaking, if interest and/or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan, it becomes an NPA. So, if three EMIs are not paid, then it will add to the NPAs, the official said adding: “At the same time, implementation on the loan waiver decision could delay money coming back which means more NPAs.”

Meanwhile, government officials said the actual implementation of loan waiver scheme is much different from what was announced earlier. “The UPA government announced nationwide farm waiver with initial amount of over ₹70,000 crore while the actual amount was just ₹52,000 crore,” an official said.

Even a Comptroller & Auditor General (CAG) report in 2013 said that monitoring of the scheme was weak. It said that no record of loan application receipt accepted or rejected was maintained. Out of 90,576 cases, there were lapses in 20,216. Around ₹164 crore was waived off in violation of guidelines.

Interestingly, the BJP-ruled State of Assam has announced farm loan waiver while the party said that if it comes to the power in Odisha, it will go for loan waiver. Meanwhile, a senior functionary of the Modi government reiterated that as of now, there is no plan to roll out such a scheme at the national level.

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